I am very conscious that in the descriptions and explanations thus far I have referred to the ‘binary option proposition’ and the ‘option proposition’ as I wanted to introduce the various terms and terminology in logical steps, and so avoid overwhelming you as the reader. However, I feel it is now time to introduce two further option terms, namely the strike price and associated option chains.

If you feel at this point we are moving further and further away from fixed odds trading, you would be correct.Let’s start with the strike price, which is very simple. The strike price is the price which must be exceeded for the binary to close at 100 or not achieved for the binary to close at 0. This is the point at which the probability tips over the 50% line.

As with vanilla options, so binary option providers offer a range of proposition’ and the ‘option proposition’ as I wanted to introduce the various terms and terminology in logical steps, and so avoid overwhelming you as the reader. However, I feel it is now time to introduce two further option terms, namely the strike price and associated option chains.

If you feel at this point we are moving further and further away from fixed odds trading, you would be correct.Let’s start with the strike price, which is very simple. The strike price is the price which must be exceeded for the binary to close at 100 or not achieved for the binary to close at 0. This is the point at which the probability tips over the 50% line.

As with vanilla options, so binary option providers offer a range of increments might be 25 points, and each rung of the ladder will have its own strike price with the current binary option quote alongside. In Fig 4.13 I have created a simple schematic which I hope explains these basic principles.